Pimco CEO Weighs in on Central Banks

Pimco’s Mohamed El-Erian weighs in on capital markets, central banks and the possible end to the bull run in bonds with WSJ’s Francesco Guerrera. Photo: AP

This transcript has been automatically generated and may not be 100% accurate.

I ... I am welcome to our money be the new global finance the market wants all the Wall Street Journal ... joining us today one of the most important and clears thinkers on financial matters Ward Why ... Muhammad Al Arian ... he's the CEO and co CIO been called the giant that ... awesome on from from ... he's joining us from Utah Beach I'm on it ... my employer ... well I'm very well thank you and I think the shoes are really out we've got your assessment off the very interesting moment relieving and we have that central banks that pumping trillions of dollars into the board economists to try and revive it ... with investors moving to West riskier asset classes as a result ... and at a hearing the background lingering concerns over the strength of the economic recovery ... from the U S to Europe to Japan how you view the moment ... in in in the new colony in these moments ... I mean it's exactly how you started which is this is a fairly Oct official time ... that the central bank's of being forced ... to do ... the loss of experimental stuff ... he I think most investors out there often warned between excitement ... hope ... and anxiety and excitement that the stock market has done so well ... year to date ... I hope that maybe this time around ... the broad stock market performance would actually be invalidated by the fundamentals ... but anxiety ... because there's so many on certainty so many macro uncertainties ... policy uncertainties and geopolitical uncertainty ... says a very interesting mix ... and as a question as to what will prevail in the end of the day ... and when is the end of the day ... so Invesco's white U N and many others I must be succumbing to a form of schizophrenia that gets your your torn between that ... the fear and greed if you like and and how would you on a day-to-day basis I realign the two ... so the best way to think of this is a wonderful analogy ... that my colleague Bill Gross cannot with estimates on the south Californian analogies I apologize for that but it has to do with people who say if ... you if you are set for ... a Namata says that he is not a so so but to watch them fall fall from the beach here ... is this if you wait for the lightweight ... and you have type one and a two hour aspire one Airways to wait too long you don't think any weights and then you end up losing because you never got involved ... write to entertain the wrong ... way so in Vestas today ... has to be Bailey differentiated as to which we didn't think ... they've got understand that at some point the wave of rape ... and death with a gotta get out in time ... but at the same time take on stand just doing nothing ... so we I ... when to be selected in this environment ... and we are going to suffer just a question not just what can go wide ... but what type of mistakes can occur ... and I think one of the biggest of the stake sale from Monday a central ... bank if it doesn't combine two of keeping this ... show on the road is of course so they we'd all too soon or they they overstayed their welcome night thus ... of stoking inflation which when you think is the most likely risk at the moment ... the second so we think that they will most likely ... to stay too long ... and there were consciously make that mistake what I mean by that ... when they think of which mistake is it easy to correct ... they believe that ... collecting an inflation mistake is easier than ... collecting and growth mistakes why ... because of the only invented makers of certain segments ... so for them ... this asymmetrical tons of mistakes so ... our belief ... is that they will stay in too long rather than exit prematurely pundits ... but of course the other side effect of the traps contenders on the fact that the of that is that ... investors are moving ... towards riskier and riskier assets in order to reach for yield and also to think about that is cheap money ... in speculation so what point will we stop warning about bubbles any meeting with bubbles to be wary about ... for now with a book on the stock ... and it's important to understand exactly what he said ... which is that in order for central banks to achieve the ultimate economic objectives ... which is growth and jobs ... they have to push investors into taking more risk ... than is justified ... because the way Central Back SA for eating ... disorder wealth effect and the analyst or ... so ... the mock it's all in the midst of this transmission mechanism for while it feels great ... because in order to achieve an economic objectives ... they have to push market valuations to bear we are different levels ... but even these levels are validated by the fundamentals ... right then investors will get better ... so I think that that now investors should recognize ... that interest me every single market sentiment ... we are trading at barely opposition that was too full Basel for equities is to across the board ... so those that I'm ... over forty more cautious stance achieving some weeding Cashel paging away because you don't want to be too long in neices Casa de state-run ... collected over the few things that if you in risk assets quantity matters ... and like quality to get the racism that that Anna ... Faris ... very strong balance sheets that are robust enough ... that are resilient enough to navigate which is a very few with corporate and killed in violent ... and secondly exposure to the genuine pairs of Crocs bought out the fishing there's a pro ... second ... if you are in the fixed income market ... sovereign risk of mad is a great deal and Phil focusing on the higher quantity which way should be ... in the sovereign risk market where you'll on the deal that matter be callous them wrong then ... because as the to be by far the most volatile caught ... with a tug of war was going after ... some absurdly you absolutely right ... value cash not only ... in terms of ... hard negatives the rate ... but all symptoms of the auction nineteen gives you ... and finally don't give up too much liquidity because right now we're not being paid much to from to give up of liquidity ...